US President Barack Obama has recalled the sentiments of the nation's founding fathers during an inaugural speech in which he promised the world that the US is "ready to lead once more".

About one million people watched the inauguration from the National Mall and hundreds of thousands more packed Pennsylvania Avenue to watch the inaugural parade.

President Obama's speech acknowledged that his country faces daunting challenges such as an economic crisis and two wars.

"Today I say to you that the challenges we face are real," he said.

"They are serious and they are many. They will not be met easily or in a short span of time.

"But know this, America - they will be met."

Mr Obama recounted the efforts of the country's settlers as he rallied his nation.

"Time and again these men and women struggled and sacrificed and worked till their hands were raw so that we might live a better life," he said.

"They saw America as bigger than the sum of our individual ambitions; greater than all the differences of birth or wealth or faction. This is the journey we continue today."

He denied the view that the United States' citizens are too jaded to cope with the tasks ahead.

"What the cynics fail to understand is that the ground has shifted beneath them - that the stale political arguments that have consumed us for so long no longer apply," he said.

"We remain a young nation, but in the words of Scripture, the time has come to set aside childish things," he said.

"The time has come to reaffirm our enduring spirit; to choose our better history; to carry forward that precious gift, that noble idea, passed on from generation to generation: the God-given promise that all are equal, all are free, and all deserve a chance to pursue their full measure of happiness."

He reached out to the Muslim world and "people of poor nations", and promised to defeat terrorists.

"Know that America is a friend of each nation and every man, woman, and child who seeks a future of peace and dignity, and that we are ready to lead once more," he said.

Mr Obama vowed a "prudent" use of US power, leading with the "justness of our cause, the force of our example, the tempering qualities of humility and restraint."

The ceremony took place in a three-square-kilometre area of the capital which has been turned into a hyper-secure zone.

More than 12,500 active troops and military reservists, thousands of metropolitan police as well as personnel from 57 departments around the nation descended on Washington.

Inauguration ceremony

Earlier, Mr Obama attended a morning worship service, in honour of a tradition that began with Franklin D Roosevelt in 1933.

Then he met outgoing president George W Bush at the White House and the two went together to the US Capitol, where there were performances by Aretha Franklin, composer John Williams, and the US Navy Band and Marine Band.

Conservative pastor Rick Warren opened proceedings with an invocation, Reverend Joseph Lowery gave a benediction.

Then Joe Biden was sworn in as Vice-President, beginning a second career after 36 years in the US Senate representing the state of Delaware.

Mr Obama then took the Oath of Office, becoming the first African-American to do so.

"I, Barack Hussein Obama, do solemnly swear that I will execute the office of President of the United States faithfully and will to the best of my ability, preserve, protect and defend the Constitution of the United States, so help me God," said Obama, the 44th US president, sparking a massive roar from the crowd.

Poet and playwright Elizabeth Alexander read a poem written for the occasion.

Now Mr Obama will escort outgoing president George W Bush to a departure ceremony.

Then Mr Obama, Mr Biden and their families will attend a luncheon in the Statuary Hall of the US Capitol, along with about 200 guests, who will enjoy a menu inspired by the tastes of Mr Lincoln.

Afterwards, the 56th Inaugural Parade will travel down Pennsylvania Avenue from the Capitol to the White House.

The festivities will continue long afterwards, with the Presidential Inaugural Committee hosting 10 official inaugural balls.

Long road

The inauguration caps a stunning rise, which in four short years has propelled Mr Obama into the Oval Office.

With echoes of the themes of Martin Luther King and popular president John F Kennedy, the 47-year-old Democrat ignited his country and the world with his message of hope, unity and change.

The son of a Kenyan father and a white mother from Kansas, Mr Obama seems to be at ease in both worlds and has sought to rise above the issue of race to be a president who can unify all races.

In defying the odds to defeat Hillary Clinton in the bruising White House Democratic primaries, Mr Obama overturned the perception that America was not ready to vote for a black president, and crushed the weight of the Republican attack machine.

Born in Hawaii on August 4, 1961, Mr Obama's path to the White House has not been backed by the privilege and wealth often enjoyed by past candidates.

His father left when he was just two and the young Barack Obama later moved to Indonesia with his mother, Ann, when she re-married.

The young boy known as "Barry" spent several years in Jakarta, before returning to Hawaii to live with his maternal grandparents when he was in his teens.

After attending Columbia University in New York, Mr Obama went to the elite Harvard Law School, where he was the first black American to be president of the influential Harvard Law Review.

It was while working at a Chicago law firm that he met and then married Michelle, a fellow lawyer, in 1992. The couple has two young daughters, Malia 10, and Sasha, seven.

Mr Obama embarked on his political career in 1996, when he won a seat in the local Senate.

The ABC is giving live coverage of the US Presidential inauguration on ABC Local Radio, Television and Online.